Ann: FY22 Results Presentation, page-26

SteveSage,

That is a fair call. Having run a business in Oz that imported what it sold I saw firsthand the effects of FX - could be a huge blessing or diabolical to the P&L. In that business we put together a pricing strategy and raised prices very rapidly when costs went up due to fx. For NTD - unless you are producing the tyres here everyone is facing the same headwind. Larger customers on contracts you could write in price adjustment clauses triggered by fx movements that worked as natural hedges... but smaller customers you just have to move quickly to reprice. And existing inventory can hurt or help.

A tyre that costs $100 USD costs AUD $125 when fx from the USD is .8. Assuming they sold it for 30% margin it would sell for $162. But when fx drops to .64 to the USD that same tyre costs AUD $156. So if they are still selling it for 162 their margin drops from $37 to $6. ie gross margin drops from 30% to 3.7%. So the jaws can swing wildly.

I know this will seem very basic but I found it astonishing how quickly fx could materially change the business. I used to look at it every day. Hedging works but is very expensive. Pricing requires strict discipline and effective salespeople ( who immediately change prices and bids.)

I would expect that over time they will have the pricing right and it will become a question of managing their larger enterprise. Do they get scale benefits, get ERP right and tuck in the acquisitions gaining the advantages and synergy? I am currently holding at a loss however they are getting pretty close to a price where I will top up more.

Cheers.

Cuppa